ENERGY Regulation Board (ERB) board chairperson Reynolds Bowa says the board has to balance between what is in the best interest of the people and keeping fuel suppliers in business.
And Bowa says Zambia is better off having fuel prices hiked by K2 than running out of the commodity.
In an interview, Bowa said fuel prices were on the rise globally.
“We are very concerned with what people say, we work in the service of the people. The thing that needs to be understood is that we have to do a balancing act between what is in the best interest of the people, and what will also keep the suppliers in business. If we make the price too low, the suppliers will not do business because they are in business to make money. But if we make the price too high and the businesses are making too much money then we will be unfair to the public, so we balance in between. Now the instruments we use to balance are the international oil price and the exchange rate,” Bowa said.
“Now, in this past month, the international price of oil has increased to somewhere around US$ 102 per barrel. That is what we were working with. This is the average price for the month between January and February and then the exchange rate is somewhere around US$ 18.15 to arrive at the current price. So, the oil companies are also complaining because as I am talking to you, the oil prices are somewhere around US$110 so it is still going up. Our hope is that over a little bit of time, the situation in Eastern Europe will stabilize and oil prices will become stable and start to come down. They have not been this high since 15 years ago, so it’s a very unusual situation and we are trying our best to balance between the needs of our people and the requirements of the suppliers of fuel to remain in business.”
He said the conflict between Russia and Ukraine had worsened the situation.
Bowa said Zambia was not an exception to the global trends.
“The conflict between Russia and Ukraine has exacerbated the situation. Russia is a very significant supplier of oil. When Russia is at war, it means that Russia is unable to supply reliably because it diverts its own resources to support its war but also because of the sanctions, they are unable to export even if they want to. Which means the amount of oil available in the market is reduced because you are taking out a major supplier. Now, because of that, when supply reduces, compared to demand, the price goes up. This is exactly what is happening. So, in the long term, the prices should go back to normality but nobody can predict when exactly that will happen. By the way, these prices are rising everywhere, in all countries everywhere in the world and we are not an exception,” he said.
Bowa added that the price of fuel being used currently was for a month before, which he said was actually lower than the current price obtaining on the international market.
“There is a time lapse of approximately two weeks because the fuel that we use is bought either in South Africa or in Mozambique at those ports or in Tanzania sometimes. Now, it takes two weeks from the date they order the fuel to the date it arrives in Zambia. And we assume it takes a further two weeks for it to be distributed in the country. So, we are working with fuel that is essentially on the market today [which] was procured a month before and so when we price, we price on what was the price one month ago. So, this price we have announced the day before is not the price that fuel is today in the international market. The price today is actually higher because of the war. So, when you ask a question that the war only started a week ago, yes, so the price today is US$ 110, the price we used to arrive at the fuel price we are using now was US$ 102,” he said.
When asked about his views on Chibamba Kanyama’s remarks in which he suggested that the monthly price reviews were unsustainable and it was better to hike prices in advance so that people could plan better,
Bowa argued that maintaining the prices for longer periods was tried before but it did not work in the country’s favour.
He added that Zambia was better off having fuel prices hiked by K2 than running out of the commodity.
“I saw that. Life doesn’t work that way. If you are sitting in the comfort of your seat, you can afford to be like a university that talks about theoretical things but these are issues that affect our people on a day-to-day basis, this is real life. So, the best that we can do in real life is not to guess prices, it is to see what is the actual price a month before and then we try to follow that. If we don’t track the international price, what will happen is that we won’t keep pace with the needs of the suppliers and then they will divert their supply to other places, they won’t supply us. If we run out of fuel, this country has a bigger problem than if we increase fuel by K2. It is a better situation for our country to have fuel which costs K2 more than to have no fuel because we were doing some speculation and guessing the price and we got the guessing wrong. So, we have to be practical, we have to be realistic, we have to protect the interests of our people and our country. So, the only way to do this is to work with the real prices and to try those real prices as closely as possible,” he said.
“You remember that as a country we tried to hold the price constant for two years. Now we were successful in holding the price constant but what we did was to create a situation where when the first price increase after that happened, the price increase was very high. But even with a very high change in the amount of price, there was still a very large debt on the government’s books. So, in the end, we did not really help ourselves. This business of saying ‘let us try longer periods’, is something we have tried before and it did not work in the interest of the country.”
Bowa, however, said the Board listened to everyone’s opinions.
“We listen to everybody’s opinions and where they make a valid point, we have thought about, we listen. We want to use the best brains that our country is able to provide, we work together and move forward. So, we don’t ignore anybody. Where we don’t agree, it is not because we have not listened or haven’t heard, we hear and wherever there is useful advice, we follow it. We even ask them to come and talk to us to make it clear, so everybody has access,” said Bowa.